Mail Time- Credit Spreads
Let's take a breather from the relative performance discussion and tackle some viewer mail. NGBSTL posed the following question in response to my introduction post, A Primer on Relative Performance.
I enjoy credit spreads b/c my view is they are one of a few ways you can profit from 2 outta the only 3 possible behaviors of underlying (up,down,sideways): so it can either go away from you or slosh around where it is, and you profit in both those instances. My criteria for finding ideal candidates this far has been limited to seeking some sort of technical line of defense between short strike & current price. But I'd love to learn more 'sophisticated' criteria for finding such candidates...maybe a future post? thx!
NGBSTL,
Thanks for the comments and question. The higher probability of profit inherent with selling out-of-the money credit spreads is certainly one of the advantages to using them. The idea of winning the majority of the time is an alluring prospect for traders that hear of this type of strategy (whether it be selling call spreads, put spreads or both).
